Despite the apparent benefits of adopting any new technology, how many firms are willing to "fix" what's not broken by ripping out and replacing a working system? Not many, to be sure. But when firms are forced to replace an existing technology or migrate to the latest and greatest replacement because the existing system no longer is adequate, that's when things get interesting.
Verity Wealth Advisors, a private wealth management firm in San Francisco with $200 million under management, recently faced its own such moment of truth. The company -- in business since June 2003 -- had been humming along quite nicely when it received one of those calls that can ruin any small business owner's day. It was the landlord on the line, informing Verity that he would no longer be managing the company's traditional phone service (for which Verity paid around $800 per month). "He didn't want to be in the phone business, and he wasn't any good at it anyway," says Verity cofounder Christopher Wilkens.
Informed of the impending change in August 2005, Verity was given three months to deal with the situation. "The system we had was working fine," Wilkens recalls. "It wasn't the greatest phone system by any stretch, but we didn't have to think about it. We wrote one check, and it was easy."
Hitting the Market
Out of the gate, Wilkens says he began investigating a replacement PBX solution -- the same traditional phone system that had been supported by his landlord. However, Wilkens soon found that simply getting up and running on such a solution would cost $2,000 to $3,000 and require hardware for which he didn't have space. Wilkens quickly determined that he wanted a remote hosted solution to make the phone system someone else's concern. "We are big proponents of focusing on what we do and trying to get out of all these little ancillary things where we don't have the scale or expertise," he says.
Wilkens began making calls to local consultants about the PBX situation. Recalling a small-business owner colleague who had gone with a Voice Over Internet Protocol (VOIP) solution, Wilkens ran the idea past one consultant, who remarked, "Yeah, I would go with the hosted VOIP route," according to Wilkens.
VOIP sometimes can be the right answer, says Donald Light, a senior analyst with Boston-based Celent Communications. "The strategic business benefits basically revolve around giving customers better access to people inside the firm and giving everyone -- customers and staff -- easier and faster access to information," he says.
Like Verity, other small financial firms also have found themselves shopping for phone service when they have moved or opened new offices. Imperium Partners, an institutional alternative asset management firm based in New York City, and Thesis Capital Management, another New York-based hedge fund, both chose an outsourced IP phone system from New York-based M5 Networks when they needed to open new offices and install a reliable communications infrastructure.
But switching the phone system -- the vital communication lifeline of any company -- to VOIP can be a scary proposition. Somewhat pleasantly surprised at the PBX consultant's moment of clarity, Wilkens says his first step was to Google "VOIP." Seattle-based Speakeasy came on the screen. "It was a name I had heard of. I called them up and got a very quick response and a very thorough proposal," Wilkens says.
However, rather than signing up right then and there, Wilkens says he "put the thing on ice" for a few months and started looking into San Jose, Calif.-based Covad -- the company used by his colleague. "I had a hard time getting them to return my phone calls, and I was thinking, 'Geez, if this is how they treat someone who might become a client, it would only go downhill from there if I were to become one,'" Wilkens contends. "That turned me off."
Once Wilkens became confident that Speakeasy was not going out of business anytime soon, his decision was easy. "I found the client service was far better at Speakeasy," he says. "I got comfortable that any risk we were assuming by going with a smaller provider was more than offset by the client service."
According to Wilkens, Verity got a T1 line, a router, a VOIP converter and six San Jose, Calif.-based Cisco Systems phones with voice mail on each from Speakeasy. The phones were approximately $400 each. After some credits back and a free month of T1 service, Wilkens says the start-up costs were around $2,500, with monthly costs between $700 and $800 -- a similar monthly charge to what Verity had been paying its landlord for PBX service.
However, comparing the before and after monthly charges isn't an apples-to-apples comparison, Wilkens stresses. "We have a T1 now. The hosted solution from the landlord was expensive, and we were overpaying for what we were getting," he says. "We are now paying the same, but we have a more reliable Internet connection, and we have a far better phone system. So for us it was a no-brainer to pay the $2,500 up-front charge to get a phone system that was far more flexible and better suited to what we do. It was really a very easy decision for us."
So Far, So Good
Downtime for implementation was minimal, according to Wilkens -- Verity went without phone service for approximately half a day. However, the firm did feel the effects of working with a small company when Speakeasy's outside contractor used to implement the T1 was less than impressive. "That didn't go very smoothly," Wilkens says. "He was late and not qualified. But Speakeasy knew what they were doing and talked him through it, and he got it done."
To date, Wilkens says Verity is quite happy with its Speakeasy VOIP experience, having only suffered two minor outages since implementation. He remarks that it's "undeniable" traditional voice service is more reliable than VOIP -- as a loss of electricity in the VOIP world means both Internet and phone services are lost. However, if traditional voice is 99.999 percent reliable, Wilkens places VOIP at 99 percent.
Celent's Light notes that business-to-business quality VOIP is in a far different class than the consumer version of the technology, so potential users should not have the wrong idea about the quality they will be receiving. "With B-to-B, those challenges are pretty well met," he says. "Rarely, if ever, is there a problem, and then it's typically only in the implementation period." But the benefits, Light adds, are significant.
Case in point, Wilkens -- who has two phones in the office -- can program both to ring simultaneously if he chooses, and, if he doesn't pick up either of those, his cell phone will ring. Wilkens can go as far as listing which specific incoming numbers are to be forwarded to his cell phone. "If you have five clients that you really want to always be reachable for, you can plug their numbers into the system and say, 'If this number ever calls me, find me,'" he says.
Here, Speakeasy's size may have been an asset again, as Wilkens says Verity employees changed their minds a few times regarding how the call sequence would work best. "[Speakeasy] was incredibly patient," he says.
So are there any compelling reasons not to at least investigate a VOIP solution? "Will the Internet be there in 15 years?" asks Light in response. "If the answer is 'yes,' then I think the answer is 'no.' I cannot foresee a likely scenario that wouldn't have everyone using VOIP in 10 to 15 years." <<<
PBX: A Dying Breed?
A Private Branch eXchange (also called PBX) is a telephone exchange owned by a private business, as opposed to one owned by a common carrier or by a telephone company. Using a PBX saves connecting all of a business' telephones separately to the public telephone network. Such a set-up would require every set to have its own line (usually with a monthly recurring line charge), and "internal" calls would have to be routed out of the building to a central switch, only to come back in again.